Alstom set to mothball Derby plant over HS2 order delays

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French train maker Alstom has put the UK government on notice that it is planning to mothball its historic factory in Derby that employs 1,300 people after delays in orders for the High Speed 2 line. 

The plant, which Alstom acquired in its 2021 takeover of Canada’s Bombardier, does not have enough work to keep functioning normally in the coming years, in part because of UK Prime Minister Rishi Sunak’s decision to cancel the northern part of the project from Birmingham to Manchester.

“We have worked constructively with the government on securing a sustainable future for Derby Litchurch Lane, but after 10 months of discussions we have run out of time, and the production lines have stopped,” said Alstom.

“We will now consult with our staff, with trades unions and with our UK supply chain to provide as much certainty as we can,” it added. 

Alstom and its joint venture partner Hitachi in 2021 won a contract worth up to £2.8bn to build 54 trains for the HS2 rail line.

Mark Harper, the secretary of state for transport, said in a letter posted on social media platform X that he recognised the “challenges” faced by Alstom, Hitachi and their suppliers.

He said the government had “looked extensively at bringing forward opportunities for rolling stock orders and refurbishment”. 

But Harper also added: “Train manufacturing is a competitive, commercial market, which means there can be no guarantee of orders for individual manufacturers, and they need to factor this into their business planning and bidding decisions.”

Alstom’s woes in the UK were one of the causes of a cash crunch the group announced in October, which had led to inventory build-ups and delays in taking payment for orders. It said about a third of the squeeze stemmed from delays in completing the Aventra programme, a project to build 443 electric trains in the UK. 

As Alstom sought to protect its investment grade credit rating, the French company soon after said it would start selling assets and flagged that it might potentially need to carry out a capital increase. Alstom’s shares are trading about 30 per cent lower than before the October warning, near their historic lows, to close at €14.13 on Thursday.

Preparations are under way for the possible capital increase, people familiar with the matter have said, although no final decisions have been made on its size or timing. 

Known for making France’s high-speed TGV trains, Alstom is the world’s second-biggest train manufacturer after China’s CRRC and has contracts stretching from Australia to Saudi Arabia, with more than 80,000 employees globally.

Labour’s shadow transport secretary Louise Haigh said the mothballing of Alstom’s Derby plant “will be devastating for Alstom employees, for Derby, and for Britain’s rail industry”.

She added that Harper “has failed to treat this situation with the urgency it deserves and has questions to answer on why he has failed to deliver on agreements to act to plug gaps in order schedules”.